Which Is More Likely to Stimulate Aggregate Demand in a Timely

question 72

Multiple Choice

Which is more likely to stimulate aggregate demand in a timely manner?

• A) a tax cut, because households will increase their consumption by the full amount of their tax reduction
• B) a tax cut, because disbursement can take place quickly while spending increases are generally spread out over several years
• C) a spending increase, because disbursement can take place quickly while a tax cut will be spread out over several years
• D) a spending increase, because it can be easily reversed once the economy has recovered

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Definitions:

Stimulus Substitution

A theory in classical conditioning suggesting that the conditioned stimulus acts as a substitute for the unconditioned stimulus, eliciting the same response.

Classical Conditioning

An educational mechanism where the consistent pairing of two stimuli occurs; the response which initially is drawn by the second stimulus, in time, is drawn by the first stimulus alone.

Conditioned Stimulus

A previously neutral stimulus that, after being repeatedly associated with an unconditioned stimulus, evokes a conditioned response.

Conditioned Fear

A learned response to a previously neutral stimulus that has become associated with a frightful event or situation.